3 Ways Enterprises Can Innovate Like Startups

Enterprises face challenges like never before. Technology and the digital revolution are turning industries inside out. Most enterprises need to get their products to market quickly and stay ahead of more nimble startups. Yet because they are much bigger, they move more slowly, and their processes are ossified.

By applying the Lean principles that have allowed startups to disrupt established industries, enterprises can establish innovation as a capability, and at scale. Here’s what organizations can do to turn even the largest enterprise into one that is nimble and responsive.

The key to improving employee engagement lies in reducing learning anxiety in your organization. Create safe environments for people to try and experiment iteratively. A culture of experimentation solves problems, iterates based on customer feedback, and measures outcomes instead of outputs. Learning to experiment and fail quickly drives employee engagement and innovation, serving both your customers and business goals.

At The New York Times, Al Ming spoke on how the storied news organization took a low risk approach to innovate on challenges across the mobile, desktop, and e-commerce platforms. The Times started with small, cross-functional teams, who tested their ideas in the market, receiving direct feedback from customers on what they needed to build. The learnings from the process are now part of the company’s DNA, making product discovery sustainable.

“Don’t bet the farm. Most of your ideas will fail. Instead, make many small bets and grow.”

Large organizations particularly struggle with portfolio management, as they are built on two modes of operation: exploit and sustain. Financial management, metrics, and reporting support exploit and sustain, but these metrics do not make sense in searching out new opportunities for the organization.

For example, it doesn’t make sense to measure innovation with ROI. When organizations are exploring potential new value propositions, they are burning money, rarely generating it early on. The main purpose of explore is to weed out ideas that don’t work and identify those that could, so a better measure to use is love metrics.

Manage your product and innovation portfolios to meet changing customer needs and demands, and not to support the current cash cow. Spin off new products and services and retire those that are no longer valuable. One example comes from Slack. They began as an online game company. but the founder, Stewart Butterfield used residual funding to explore the viability of spinning out the online chat service their teams had built for themselves. Two years later, they are one of Silicon Valley’s “unicorns” (startups valued at over $1 billion), with a $2.8 billion valuation.

“It’s the definition of insanity to keep doing the same things but expect different results.”

The traditional model of how organizations should work is broken. Large organizations are often structured through command-and-control, where strategy is set at the top and the people below execute. Employees see only their individual project, instead of understanding their contribution as a product and their place in the end-to-end flow of value to customers. Costs explode and dissatisfaction sets in.

Instead of command-and-control, knowledge workers need autonomy and principle of mission. Small cross-functional teams aligned across business outcomes can take a product perspective based on feedback from real customers. When employees are aligned on outcomes, rather than outputs, they feel a sense of ownership and responsibility.

When the UK’s Government Digital Service decided to put all central government services in the UK under the single domain GOV.UK, it took a process more associated with startups than large government agencies. Multidisciplinary teams, consisting of specialists in everything from government policy to software development to content design took responsibility for entire products involved with the domain.

GOV.UK ended up saving the British government £50 million, and was so successful that the government decided to take the same approach across different branches. Services for for citizens were streamlined and transformed.

It’s never too late to begin the journey towards becoming a lean enterprise. Start today, because a year from now, you’ll wish you had built that capability to adapt to change.

Barry O'Reilly works with ThoughtWorks, consulting with leading global organizations on continuous improvement using lean and agile practices and principles. He has been an entrepreneur, employee, and consultant. His passion is business model innovation, product development, organizational design and cultural transformation. He is a co-author of Lean Enterprise, the latest edition to the Eric Ries Lean Series with O'Reilly Media.

Joanne is a key member of our internal TechOps Management team, with responsibilities for IT Governance Risk and Compliance. Her passion is for finding ways to reduce risks related to software delivery and use without compromising creativity, experimentation and learning. She currently leads the global InfoSec team and is co author (with Jez Humble and Barry O'Reilly) of the book Lean Enterprise, published by O'Reilly Books.